E8-5 Determine bad debt expense and prepare the adjusting entry Godfreid Company
ID: 2511333 • Letter: E
Question
E8-5 Determine bad debt expense and prepare the adjusting entry Godfreid Company has accounts receivable of $95,400 at March 31, 2017. Credit terms are 2/10, n/30. At March 31, 2017, there is a S2,100 credit balance in Allowance for Doubtful Accounts prior to adjustment The company uses the percentage-of-receivables basis for estimating uncollectible accounts. The company's estimates of bad debts are as shown below Balance, March 31 2016 Estimated Percentage Uncollectible Age of Accounts Current 1-30 days past due 31-90 days past due Over 90 days past due 2017 $65,000 12,900 10,100 7,400 $95,400 2% $75,000 8,000 2,400 1,100 $86,500 30 50 Instructions (a) Determine the total estimated uncollectibles (b) Prepare the adjusting entry at March 31, 2017, to record bad debt expense. (c) Discuss the implications of the changes in the aging schedule from 2016 to 2017Explanation / Answer
Solution a:
Solution b:
Solution c:
From 2016 to 2017 ageing schedule changed and the amount of receivables increased in ageing of 1-30 days, 30-90 days and over 90 days from 2016 to 2017. However current receivable were reduced in 2017 from 2016. It means that company is not able to manage its accounts receivables effectively and cash collection become poor in 2017 as compared from 2017. Thus resulting in higher provision for bad debts in 2017 as compared to 2016.
Computation of estimated uncollectibles - Godfreid Company Age of accounts Balance - Mar 31 Estimated percentage uncollectible Estimated Uncollectible 2017 2016 2017 2016 Current $65,000.00 $75,000.00 2% $1,300.00 $1,500.00 1-30 days $12,900.00 $8,000.00 5% $645.00 $400.00 31-90 days $10,100.00 $2,400.00 30% $3,030.00 $720.00 Over 90 days $7,400.00 $1,100.00 50% $3,700.00 $550.00 $95,400.00 $86,500.00 $8,675.00 $3,170.00Related Questions
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